Posted on: 25/Oct/2011

 Athens eyes definitive solution

Gov’t official says the aim is for addressing all debt up to 2035, amounting to 207 billion euros

Negotiations ahead of Wednesday’s eurozone summit, aimed at hammering out a solution for the bloc’s debt crisis, continue frantically, with the German government tabling on Monday a proposal for a generous writedown of the Greek debt and a significant bolstering of the European support mechanism.

Athens is aiming at a definitive solution that would concern all of its debt, through to 2035, according to a government source speaking to Reuters from Brussels.

“We are looking at the entire Greek debt, expiring through to 2035... It does not stop at 2020 as the previous model did,” the source told Reuters, adding that any deal would have to be voluntary and involve the European Central Bank. The deal would need to concern all bonds expiring by 2035, estimated at about 207 billion euros.

“The point is to keep the country going. We shall explain the agreement to the Parliament, but it will require an increased realization of responsibility,” the official said.

On Monday Chancellor Angela Merkel reportedly presented to German opposition leaders a plan for an increase to the capacity of the European Financial Stability Facility (EFSF) to the amount of 1 trillion euros or even more, from 440 billion euros today.

Such a move would insure investors against a percentage of possible losses on eurozone government bonds and also involve the participation of outside organizations such as the International Monetary Fund.

The plan would have to be put to vote in Germany’s parliament tomorrow, before Merkel joins the summit. Opposition leaders confirmed that the haircut being discussed amounts to 50-60 percent. Asked what would happen should the private sector not accept a 50 percent haircut, the government official only told Reuters “we shall see.”

The Institute of International Finance (IIF), negotiating as a representative of private sector bondholders, is prepared to accept a discount of 40 percent, according to reports. “There are limits... to what could be considered as voluntary to the investor base and to broader market participants,” said Charles Dallara, managing director of the IIF.

 

source: http://www.ekathimerini.com

«« Let's get back to the News Overview